U.S. Department of Energy Energy Efficiency and Renewable Energy

Interaction of Stimulus Funds and Federal Tax Benefits

If stimulus funds are used to provide cash rebates or direct subsidies to residential or commercial customers, the federal tax benefits available for those projects may be reduced. However, if American Recovery and Reinvestment Act funds are loaned to recipients (even at low- or zero-interest), there would be no reduction in the benefits available to the taxpayers. That possible impact on benefits needs to be evaluated against the other obvious advantages of rebates or direct subsidies.

Additionally, if grants or rebates are provided to businesses claiming the business tax credits or accelerated depreciation, the impact of the grants or rebates may be partially offset by the accelerated depreciation benefits. For example, if a taxpayer treats a $10,000 grant as income and claims $10,000 in accelerated depreciation benefits in the same year, the grant might not result in additional tax liability.